Attorney General et Al v Baha Mar Ltd et Al; Treasurer v Baha Mar Land Holdings Ltd, Cable Beach Resorts Ltd, Baha Mar Properties Ltd and BMP Three Ltd; Water & Sewerage Corporation v BMP Golf Ltd; Gaming Board v Baha Mar Enterprises Ltd

• Jurisdiction: Bahamas
• Judge: Winder J
• Judgment Date: 04 September 2015
• Court: Supreme Court (Bahamas)
• Docket Number: 2015/COM/Com/No.42; 2015/COM/Com/No.0049, 2015/COM/Com/No.0047, 2015/COM/Com/No.0052, 2015/COM/Com/No.0050, 2015/COM/Com/No.0048, 2015/COM/Com/No.0051; 2015/COM/Com/No.0046
• Date: 04 September 2015

Supreme Court

Winder, J.

2015/COM/Com/No.42; 2015/COM/Com/No.0049, 2015/COM/Com/No.0047, 2015/COM/Com/No.0052, 2015/COM/Com/No.0050, 2015/COM/Com/No.0048, 2015/COM/Com/No.0051; 2015/COM/Com/No.0046

Attorney General et al

and

Baha Mar Ltd et al

Treasurer

and

Baha Mar Land Holdings Ltd

Cable Beach Resorts Ltd

Baha Mar Properties Ltd and Bmp Three Ltd

Water & Sewerage Corporation

and

Bmp Golf Ltd

Gaming Board

and

Baha Mar Enterprises Ltd

Appearances:

Peter Knox QC with Wayne Munroe QC, Loren Klein, Hyacinth Smith and Darcel Williamson for the Attorney-General, the National Insurance Board, the Treasurer, the Water and Sewerage Corporation and the Bahamas Electricity Corporation Wayne Munroe QC with Jayde Fowler for the Gaming Board James Corbett QC with Maurice Glinton QC, Roy Sweeting, Darren Pickstock and Meryl Glinton for the respondent Companies Raynard Rigby with Meagan Taylor for Ernst & Young

Also in attendance (in a watching capacity) Brian Simms QC with Sophia Rolle-Kapousouzoglou and Olivia Robinson-Moss for China Export Import Bank Sean Moree with Timothy Eneas for CSA Bahamas Ltd.

Civil practice and procedure - Whether original winding up petition was valid — Whether new petitions should have been permitted to assert a public interest and/or just and equitable ground as a basis for winding up the respondents — Whether a provisional liquidator should have been appointed — Whether there was a prima facie case for the making of a winding up order — Whether the appointment was necessary for the prevention of the dissipation of the company's assets — Whether the appointment was necessary in the public interest — Whether the court should have exercised its discretion to appoint joint provisional liquidators.

Winder J

These are related actions involving applications for the appointment of joint provisional liquidators, the striking out of winding up petitions (and/or parts thereof) and for general directions.

BACKGROUND

1 In July 2015 I heard an application by the respondent companies in action 2015/COM/ com/00039 (“the recognition proceedings”) for the recognition of the primacy of Chapter 11 proceeding in the US Bankruptcy Court for the District of Delaware and for judicial assistance to stay the commencement and continuation of the actions of their creditors.

2 I repeat and adopt the historical background to this dispute contained in my written decision, in the recognition proceedings, dated 31 July 2015.

3 As reflected in that historical background, on 16 July 2015, whilst arguments were ongoing in the course of the recognition proceedings, the Attorney-General (“AG”) filed a Petition for the domestic winding up of the respondent companies. The respondents say that the presentation was made without any warning. In the said Petition (“the original Petition”) the AG purported to act in a representative capacity for the Government of the Commonwealth of The Bahamas, the Treasurer of the Commonwealth of The Bahamas, Bahamas Electricity Corporation, The National Insurance Board, The Water and Sewerage Corporation and The Gaming Board of The Bahamas. Additionally, the AG casts the original Petition against all of the respondents.

4 The original Petition was settled, in part, as follows:

TO THE SUPREME COURT

The Humble Petition of the Attorney-General of the Commonwealth of The Bahamas (in a Representative Capacity for the Government of The Commonwealth of The Bahamas, the Treasurer of the Commonwealth of The Bahamas, the Bahamas Electricity Corporation, the National Insurance Board, the Gaming Board of The Bahamas and the Water and Sewerage Corporation (together hereafter referred to as “the petitioners”) of the Paul L. Adderley Building, No. 18 John F. Kennedy Drive, P.O. Box N-3007, Nassau, NP, The Bahamas shows that:

TO THE SUPREME COURT

1

The respondents were incorporated in The Bahamas. Details of the respondents' dates of incorporation, registered office address and share capital position are set out below: … 2 On June 29 2015, the respondents, who are all involved in the construction, development, operation and/or promotion of the Baha Mar Resort in The Bahamas, filed for Chapter 11 Bankruptcy in the Court of Delaware, U.S.A. The respondents did this without prior notice to the petitioners. 3 The respondents are incorporated and doing business in The Bahamas. They own, operate and have an interest in Bahamian assets and businesses, including much of the land comprising the Baha Mar Resort. 4 As at the date of this Petition, the respondents (collectively) are indebted to the petitioners in the sum of (at least) $58,845,313.17. References in this Petition to “the respondents” may be references to all, one or any number of the respondents. Details of each liability referred to in this Petition and the identity of the respondents(s) liable to discharge that liability are appended hereto. 5 Sums due in respect of Business Licence Fees and Real Property Tax 5.1 As at the 3rd July, 2015, the respondents are indebted to the Treasurer of the Commonwealth of The Bahamas in the amount of $3,342,459.70 in respect of Real Property Tax arrears. 5.2 Further, the respondents owe business licence fees in the amount of $303,337.32 which represents the following: Wyndham Business Licence Fees $289,854.94 Cable Beach Golf Course $13,482.38 A total of $3,645,797.06 is due and owing in respect of the Business licence fees and real property taxes. 6 Sums due to the Department for Immigration 6.1 The respondents are indebted to the Department of Immigration for non-payment of work permit fees. The amount outstanding for non-payment of work permit fees as at the 3rd July, 2015, totals $166,169.47. 7 Sums due to the Gaming Board of The Bahamas 7.1 The respondents have outstanding payments due to the Gaming Board of the Bahamas. The amount of outstanding payments due and payable to the Gaming Board total $11,218,630.72. This amount represent the following outstanding payments: Crystal Palace Casino Winnings arrears $9,418,630.72 Basic Taxes $1,800,000.00 7.2 In addition, the respondents are indebted to the Gaming Board of The Bahamas in the sum of $10,750,000 (“the Deferred Sum”). The timing of payment of this sum was deferred pursuant to terms agreed between the respondents and the Gaming Board. However, on current facts, it seems highly unlikely that the respondents will be in a position to fulfill their obligations under those terms and so the Gaming Board of The Bahamas reserves its rights in full in respect of the Deferred Sum. 8 Sums due to the Bahamas Electricity Corporation 8.1 The respondents made application to be supplied with electricity for the Baha Mar Resort located at Cable Beach. 8.2 The respondents are indebted to the Bahamas Electricity Corporation for non-payment of electricity bills in the amount of $26,329,953.85. 9 Sums due to the Ministry of Tourism 9.1 There is outstanding hotel guest tax due and owing by the respondents to the Ministry of Tourism in the sum of $2,604,179.28. 9.2 The respondents owe the Ministry of Tourism the total amount of $3,116,679.00. This outstanding amount represents outstanding hotel guest tax arrears for Melia Hotel for the period November and December 2014 in the amount of $351,102.72; Wyndham Hotel guest tax arrears in the amount of $2,253,076.58 for the period November 2011 — July 2014 and outstanding obligations for airlift subsidy totaling $512,500.00. 10 Sums due to the Water and Sewerage Corporation 10.1 The respondents made application to the Water and Sewerage Corporation for water and the respondents have arrears owed to the Water and Sewerage Corporation totaling the sum of B$3,086,806.04 as at 9 July 2015. 11 Sums due to the National Insurance Board of the Bahamas 11.1 The respondents are also indebted to the National Insurance Board. The First respondent has outstanding contributions due for April and May 2015 including interest to the National Insurance Board in the amount of $697,446.20, including interest as of the 26th June 2015. 11.2 In summary, the respondents owe the petitioners the sum of (at least) $58,845,313.17 (including the Deferred Sum). In addition, on 7th July, 2015 the Government of the Bahamas paid the wages of the respondents' employees for the 2 week period ending 28th June 2015. The Government of the Bahamas reserves its position in relation to the respondents' (or any of them) liability to the Government in respect of these payments and reserves the right to seek leave to amend this Petition to include this sum (together with any additional sums that the Government may be minded to pay). 12 It is Just and Equitable that the respondents be wound up 12.1 The Government of the Bahamas and its various entities are parties affected both as (i) the second largest unsecured creditor as disclosed in the Consolidated List of Creditors holding 20 largest unsecured claims filed before the Bankruptcy Court for the District of Delaware (ii) because the Government of The Bahamas and its entities have provided an estimated 1.2 billion dollars' worth of concessions to the respondents to facilitate the development. There is also a huge public interest in the project owing to the more than 2000 employees employed in the project and economic importance of the project to the Bahamas. 12.2 The Government has a major stake in the Baha Mar project and should the Order not be made the Government will suffer economically particularly with its credit rating which is under threat to being downgraded by Standard & Poors. 12.3 The respondents are unable to pay their debts as they fall due. 12.4 The respondents reportedly have unsecured debts of approximately $123 million, not including the amount claimed by the Contractor, the CCA. Further, the respondents have approximately 2,400 employees. The respondents have indicated that they intend to make redundancies in respect of almost their entire workforce...